Sarkozy urges protection of companies from non-European takeovers

Nicolas Sarkozy has urged sweeping changes to European Union free market rules to allow state protection of national companies struggling against international competition and foreign takeovers following the global financial crisis.

By Bruno Waterfield in Strasbourg

3:31PM BST 21 Oct 2008

President Sarkozy, who is the current holder of the EU's rotating president, has demanded that Brussels competition watchdogs bend tough rules on state aid to allow governments to take stakes in key industries, protecting companies from non-European takeovers.

"Stock markets are at historic lows. I do not want European citizens to wake up a few months from now and discover that European companies belong to non-European capital which has bought at the lowest point of the stock exchange," he told the European Parliament.

The rise of sovereign wealth funds, state-controlled investment vehicles, from countries such as oil rich Russia or emergent China, has led to fears that foreign investors could take over companies to advance their own political and strategic aims.

Mr Sarkozy has called for purchases by EU government-run investment funds to be "co-ordinated" across Europe to stop well-known European firms, such as French energy company, EDF falling into foreign hands.

"I would ask that all of us consider how interesting it would be to set up sovereign funds in each of our countries – and maybe these national sovereign funds could now and again co-ordinate to give an industrial response to the crisis," he said.

The European Commission has so far stepped back from restricting the activity of foreign sovereign wealth funds or giving the green light to government stakes in industry.

Italy last week announced a new limit of five per cent on the size of stakes owned in companies by foreign sovereign wealth funds and restrictions by other EU governments are expected to follow.

In a further sign that EU governments are planning more state intervention in the economy, the French President has also confirmed that, with Germany, he is pressuring the Commission into allowing government aid to car manufacturers in France and Germany.

Mr Sarkozy, as French President and previously as his country's finance minister, has frequently clashed with the Commission over the issue of competition and his efforts to seek protection for European industry.

He hit out at comments, made by Peter Mandelson the former European Trade Commissioner in 2005, describing attempts to block foreign competitors from EU markets as a new "Maginot Line", the expensive and failed French defence line put in place before the Second World War to stop Germany.

"It is not a question of building a Maginot Line. What you have to do is take into account the pragmatic situation, the markets are depressed," said President Sarkozy.

"I think the crisis, the coming recession is an opportunity for rebuilding Europe. After this crisis Europe is going to have changed and that is all for the better."